Search This Blog

Subscribe to this blog

Follow by Email

Resource nationalism takes hold in Southern Africa

ANC Youth League president Julius Malema leads thousands of party cadres on a 56km 'march against poverty' from Johannesburg to the capital Pretoria recently

IT WAS Zambia’s
then-opposition Patriotic Front (PF) leader Michael Sata’s shots across the
bows to Chinese miners during the 2006 presidential election that brought the
issue of resource nationalism in Southern Africa
into sharp focus. The following year, south of the Zambian border, Zimbabwe was to
pass a law claiming majority equity for black locals in foreign-owned mines,
among other businesses.

Further down south, a resurgent radicalism among the party’s
youth was to assert its boisterous confidence with Jacob Zuma’s election as the
new leader of South Africa’s
ruling ANC party in December 2007. Four years later, President Zuma’s
government stands buffeted by the powerful ANC Youth League and its firebrand
leader Julius Malema’s demands to nationalise the country’s vast mining sector.

Back in Zambia,
Sata is now the new tenant at State House after putting an unceremonious end to
the 20-year reign of President Rupiah Banda’s Movement for Multiparty Democracy
(MMD) in elections held in September. His fiery nationalism drew the admiration
and support of largely young and unemployed Zambians who feel left out of the
mining boom that has made the country’s economy one of the best-performing in
Africa.

Sata is sworn in as the new Zambian President, bringing an end to the MMD's 20-year rule

Chinese companies have become key players in Zambia’s
economy with total investments by the end of 2010 topping $2bn, according to official
Chinese government data. Hungry for raw materials to power its burgeoning economy,
the Asian dragon has in recent years led the influx of foreign direct
investment (FDI) in natural resources in Africa,
contributing to the continent’s accelerated growth.

Africa’s GDP growth rate is
approximately 5% a year and is forecast to continue at this pace or faster. African
countries face the challenge of translating this resource boom into continued
and sustainable economic growth, as well as ensuring that it benefits ordinary
citizens and is consistent with national and regional development priorities.

‘The resource nationalism trend
appears to be gathering pace in Southern Africa,’
observed Peter Leon, a South African legal expert who co-chairs the International
Bar Association’s Mining Law Committee. Efforts by countries to secure an
equitable share of their natural resources have led to calls for outright
nationalisation, indigenisation, or state control of strategic minerals.

In response, mining companies have no choice but to surrender to the sovereign right of resource-endowed
countries to establish a stronger participation in their mineral industries. If
they should pull out, other companies with much less to lose stand ready to
take up their place. This is already happening in Zimbabwe, where foreign miners in
the country are moving to comply with indigenisation regulations forcing
them to cede at least 51% of their stock to local blacks.

According to the Export Finance and Insurance Corporation
(EFIC)’s World Risk Developments newsletter for September, resource nationalism
is proving to be a clear and present risk for miners as ‘governments in a
variety of countries are examining options to gain a greater share of the
windfall profits flowing from strong commodity prices.’

Advisory and accountancy firm Ernst & Young (E&Y) also
noted in a recent report that resource nationalism is the biggest threat facing
the mining sector this year and next as governments seek to take advantage of
higher commodity prices to try to restore fragile finances.

‘Because the mining and metals sector rebounded quickly from
the global financial crisis, it became an early target to help restore treasury
conditions,’ the firm said, adding that it had identified at least 25 countries
in 2010/11 that had increased, or announced plans to increase, their government
take via taxes or royalties. E&Y also observed a growing trend by
governments to seek to increase local participation in investment projects.

Mick Davis, chief executive of the London Stock
Exchange-listed mining company Xstrata lamented the pattern by many
resource-rich countries to pursue retrospective changes to mining contracts as
they seek to increase rents from their natural resources. “Changes in resource
rent sharing between the owner of the resource and the beneficiator of that
resource should be prospective not retrospective,’ he wrote in Xstrata’s halfyearly report for 2011.

Xstrata's chief executive, Mick Davis

‘Mining companies take on board significant financial,
development, construction and then operational risk when they invest their
capital in projects. It is not sound policy to rewrite the basis on which those
investments were made after the risks have been borne and the investment
implemented.’

But according to EFIC, apart from a handful of countries,
most seem intent upon not carrying resource nationalism to the point where it
‘kills the goose that lays the golden eggs’. Most countries have shied away
from nationalisation and seem content to increase taxes and royalties, or buy
into resource ventures, or both. In some countries the promotion of resource
nationalism is consistent with healthy private investment and production, EFIC
said. But others, such as Zimbabwe
and South Africa,
could threaten profitability and force mine closures and therefore needed to be
watched closely.

Ever touted as the paragon of stability and good corporate
governance, Botswana
is the highest ranked African mining country in this year’s Fraser Institute
report. The E&Y survey also hailed the country as a good example of how
African governments can balance collective and individual participation in
mining. The diamond-rich country jointly owns Debswana, the world’s leading
producer of diamonds by value, with De Beers in a successful public-private
partnership.

Mozambique
also belongs to the more cautious group of resource-endowed countries as it
treads carefully towards a review of its mining laws. Dubbed the world’s last
coal frontier on account of its massive coalfields in the northern Tete Province,
the country reportedly favours increased royalties and taxes on new mines, a
10-20% stake in ‘strategic’ projects for the state mining firm, and licence
cancellation for firms that fall behind with their agreed development schedule,
but has not hinted plans for a windfall profits tax.

Mines Minister Esperanca Bias said back in July that the
review may be completed by year-end and emphasised that ‘we will not do
anything without discussing with the companies.’ Unlike other countries in the
region, Mozambique
has no local ownership or equity requirements for miners and it is unclear if
that could be subject to change. Mining accounts for less than 5 percent of the
former Portuguese colony’s economy despite large deposits of coal, tantalum,
gold and other minerals.

In Zambia,
however, the mining sector is in for some anxious times, at least in the short
term, as Sata sets about reconciling the promises of his election manifesto
with the realities of the Zambian economy. He has moved quickly to suspend theissuance of new metal export permits ahead of the release of new guidelines.
Analysts say Sata has been rightly concerned about exporters misreporting the
amount of ore leaving the country and has directed that all export payments
would now have to be handled by the central bank. But more significantly for
the country’s miners, the new government wants to increase its shareholding to
at least 35% in all mining projects.

‘But that will depend on how well we negotiate with the
mining firms,’ Zambia’s
Mines Minister Wylbur Simuusa made sure to point out in an interview with
Reuters in early October. He swiftly allayed fears of nationalisation, saying:
‘We just want to have more benefits from the mines. There is no cause for
apprehension, because nothing will be done without consulting the mining
companies.’

Arguments in favour of resource nationalism have noted how
mining companies, with their disproportionate might in relation to poor African
governments, compel them to accept skewed terms that undermine their own
people’s interests. Zambia’s
current tax collection system is a case in point.

‘We want to introduce a tax collection mechanism based on
production or earnings. Under the current system, which is profit-based, some
mines have been declaring losses for the last 10 years,’ Simuusa said.

Growing disillusionment with their failure to benefit from
resource extraction in their countries has engendered more radical approaches
by some of Southern Africa’s nationalist
governments. Earlier this year Namibia announced that it intended to declare
copper, coal, gold, uranium, and zinc as strategic minerals, and thus subject
to ‘additional national protection’.

Namibia's Mines and Energy Minister Isak Katali

Mines and Energy Minister Isak Katali said the state-owned
mining entity, Epangelo Mining Company Limited (Epangelo) would now enjoy exclusive
exploration and mining rights to all these minerals and that interested investors
would in future be required to partner with Epangelo. The move sent jitters up
the spines of mining investors as far afield as London, The Namibian newspaper claimed. The
country is currently working on new mining legislation to effect the
indigenisation of control over its minerals.

Whereas Zimbabwe
has openly played its hand on indigenisation, South Africa’s ANC party is agonising
over whether or not to nationalise the country’s mines. Its decision-making organ,
the National Working Committee, appointed a research team in February this year
to investigate and report back in a year on the feasibility of mine nationalisation.
‘This decision has left a cloud of uncertainty over the industry for the next
year as it awaits the recommendations of the ANC’s policy conference in June
2012, followed by its elective conference in December 2012,’ Leon observed, ‘All
of this potentially increases the country's sovereign risk profile.’

Mining
investors are not expected to stay away, whatever the outcome of the ANC’s
policy debate. ‘The few high-quality ore reserves left untapped in the
world are largely located in Africa. As such,
companies are unlikely to leave, even in the face of higher taxes and tougher
economic terms,’ Javier Blas,
the Financial Times’ commodities editor, concluded.

Get link

Facebook

Twitter

Pinterest

Email

Other Apps

Comments

Popular Posts

BORN at the height of the national liberation struggle in the late 1970s, I grew up in post-independence Zimbabwe. Save for hazy memories, I cannot claim to possess a concrete self-consciousness of life under Ian Douglas Smith’s white supremacist Rhodesian Front government. However, having been born to young and unemployed school-leavers of peasant background, my life as a toddler was to be circumscribed in a brutally physical way by the paranoid security policies of Smith’s government.

I spent my early childhood in one of Smith’s concentration camps in a small village called Chibuwe in Chipinge district, on the country’s eastern border with Mozambique. This was a major operational zone for the nationalist guerillas fighting for black self-determination. In order to cut off the guerillas from accessing logistical and political support from the masses, Smith’s government herded African villagers living within such areas into concentration camps, which they euphemistically called ‘protec…

Foresight is a great thing for policymakers to possess. Whilst ensconced in the luxury of the Inclusive Government, the MDC-T thought it best to downgrade all its foreign assemblies from the status of constituent provinces into associate assemblies.

Predictably, the move caused no small disquiet among the party faithful in the diaspora, not least because of their sustained material contribution to the party during the struggle years. This came on the heels of the then newly installed Prime Minister's unpopular call for a reverse exodus to the mother country when he addressed Zimbabweans at London's Southwark Cathedral on his maiden trip to the UK after assuming the role in 2009. He was roundly booed, thereafter deciding to turn his back on what he deemed a prodigal flock.

Fast forward a short five years later, and the party is not only out of the comfort of both the inclusive government and the self-assuredness of imminent exclusive control of the Zimbabwean state and its res…

On the matter of how political community must be organised and run, I believe in a secular rational-legal order. I do not want to live in a theocracy such as we have in some Muslim countries where religion is the organising factor of society and subsumes all life, with religious edicts and commandments forming the basis of law.

In many such countries we see clashes between fundamentalists and moderates over the interpretation of religious dogma, with claims and counter-claims of each group being closer to the mind of God than the other, and a massive denial of freedom to certain groups, such as women, on the basis of scriptural interpretation.

I want to live in a liberal democratic order where civil rights must be allowed that, among other things, enable members to pursue their religious freedoms. I want politics to be a rational exercise where decisions and choices are based on reason and policy making responds to the rule of cause and effect.

In my view, it isn't just about Joice Mujuru, but her whole camp. Technically they're in a commanding position and I think this over the top intimidation tactic being used by the other side is the only way they can achieve their ambitions.

They can't out-vote Joice's camp and they don't have the numbers to carry through all those amendments to the party constitution that they propose to do. On those amendments too, it should trouble anyone in Zanu that they're really seeking to create a highly centralised power structure in which the leader effectively becomes the party, just as Zvobgo's problematic amendments to the national constitution concentrated executive powers in the office of the president.

These enormous powers are in effect not really meant for Mugabe, but for the one who will soon take over from him. And the question is, why would they bend over backwards, cede their power to block this, and allow the Mnangagwa faction to reshape the party stru…

Southern Africa’s longest-ruling leader Jose Eduardo Dos Santos of Angola is a man whose 32 years in office belies the security of his hold on the oil rich country. Ushered to the fore of national life when the country’s founding President Agostinho Neto died of cancer in office in 1979, Dos Santos is moving to ensure that his departure from power is as gradual and planned as his assumption of it was fortuitous and sudden.

In the opaque internal workings of the ruling Popular Movement for the Liberation of Angola (MPLA), which is one of the region’s most hardened liberation movements-turned-governments, it has not often been easy to decipher the party’s plans on the hitherto taboo question of succession. However, in early September the Angolan Novo Jornal newspaper set the country abuzz when it reported that the 69 year-old son of immigrants from Sao Tome and Principe was to stand down as president before or after next year’s elections. Quoting unnamed MPLA sources, the weekly claimed …